A clash between Poland’s right-wing president and its centrist ruling coalition over the European Union’s flagship social media law is putting the country further at risk of multimillion euro fines from Brussels. President Karol Nawrocki is holding up a bill that would implement the EU’s Digital Services Act, a tech law that allows regulators to police how social media firms moderate content. Nawrocki, an ally of U.S. President Donald Trump, said in a statement that the law would “give control of content on the internet to officials subordinate to the government, not to independent courts.” The government coalition led by Prime Minister Donald Tusk, Nawrocki’s rival, warned this further exposed them to the risk of EU fines as high as €9.5 million. Deputy Digital Minister Dariusz Standerski said in a TV interview that, “since the president decided to veto this law, I’m assuming he is also willing to have these costs [of a potential fine] charged to the budget of the President’s Office.” Nawrocki’s refusal to sign the bill brings back bad memories of Warsaw’s years-long clash with Brussels over the rule of law, a conflict that began when Nawrocki’s Law and Justice party rose to power in 2015 and started reforming the country’s courts and regulators. The EU imposed €320 million in penalties on Poland from 2021-2023. Warsaw was already in a fight with the Commission over its slow implementation of the tech rulebook since 2024, when the EU executive put Poland on notice for delaying the law’s implementation and for not designating a responsible authority. In May last year Brussels took Warsaw to court over the issue. If the EU imposes new fines over the rollout of digital rules, it would “reignite debates reminiscent of the rule-of-law mechanism and frozen funds disputes,” said Jakub Szymik, founder of Warsaw-based non-profit watchdog group CEE Digital Democracy Watch. Failure to implement the tech law could in the long run even lead to fines and penalties accruing over time, as happened when Warsaw refused to reform its courts during the earlier rule of law crisis. The European Commission said in a statement that it “will not comment on national legislative procedures.” It added that “implementing the [Digital Services Act] into national law is essential to allow users in Poland to benefit from the same DSA rights.” “This is why we have an ongoing infringement procedure against Poland” for its “failure to designate and empower” a responsible authority, the statement said. Under the tech platforms law, countries were supposed to designate a national authority to oversee the rules by February 2024. Poland is the only EU country that hasn’t moved to at least formally agree on which regulator that should be. The European Commission is the chief regulator for a group of very large online platforms, including Elon Musk’s X, Meta’s Facebook and Instagram, Google’s YouTube, Chinese-owned TikTok and Shein and others. But national governments have the power to enforce the law on smaller platforms and certify third parties for dispute resolution, among other things. National laws allow users to exercise their rights to appeal to online platforms and challenge decisions. When blocking the bill last Friday, Nawrocki said a new version could be ready within two months. But that was “very unlikely … given that work on the current version has been ongoing for nearly two years and no concrete alternative has been presented” by the president, said Szymik, the NGO official. The Digital Services Act has become a flashpoint in the political fight between Brussels and Washington over how to police online platforms. The EU imposed its first-ever fine under the law on X in December, prompting the U.S. administration to sanction former EU Commissioner Thierry Breton and four other Europeans. Nawrocki last week likened the law to “the construction of the Ministry of Truth from George Orwell’s novel 1984,” a criticism that echoed claims by Trump and his top MAGA officials that the law censored conservatives and right-wingers. Bartosz Brzeziński contributed reporting.

LONDON — Reform UK’s deputy leader Richard Tice has floated replacing the Office for Budget Responsibility with a rotating panel of experts to produce economic forecasts for the U.K. government.  In an interview with POLITICO, Tice attacked the OBR’s “woeful” forecasts and proposed replacing it with a revolving panel of the top economic forecasters in the country, who would produce their own estimates of the U.K.’s fiscal health. “What’s the point of them if you’re not going to do your job properly?” Tice said of Britain’s under-fire fiscal watchdog. “There is a turgid reluctance to accept the process of continuous improvement.” “If you didn’t have the OBR, what are you replacing [it with]? Well, maybe you could have a revolving panel of the top eight economic forecasters who have, twice a year, a mandate to produce their own estimate of the key six [to] eight metrics,” he added. His comments follow previous suggestions from Reform UK’s leader Nigel Farage to abolish the body, but it has not yet been clear what the party would propose to take its place. As Reform continues to top U.K. opinion polls, the development of the party’s economic agenda has been closely watched by the financial sector and beyond. The OBR has come under attack for its forecasting record from both sides of the political aisle. It faced significant scrutiny in November after its economic and fiscal outlook, which contained detailed information on the contents of Chancellor Rachel Reeves’ autumn budget, was accidentally made accessible hours before she began her official announcement. OBR Chair Richard Hughes stepped down as a result of the leak. The OBR has also been criticized for its outsized influence on government spending, given that its forecasts can have a significant impact on which policies the Treasury decides to include in the budget. “The OBR is literally telling the government how to run its policy,” Tice said. “The government comes up with an idea, and it says to the OBR ‘what’s the consequence of this?’” “[The OBR] say this is our forecast, so the government says I can’t do that or I can do that, and then you find out that the OBR forecast was useless, not worth the paper it’s written on.” Tice joins former Prime Minister Liz Truss in his criticism of the independent body. Truss, who also called for the OBR to be abolished, shunned the watchdog’s provision of an independent economic forecast and analysis for her 2022 mini budget, leading to market turmoil. One of the Labour Party’s first acts upon reaching government in July 2024 was to put in place a “budget responsibility” bill to enable the OBR to produce of its own volition a forecast on major government tax or spending plans.

WARSAW — Poland’s nationalist President Karol Nawrocki on Friday sided with his ally U.S. President Donald Trump to veto legislation on enforcing the EU’s social media law, which is hated by the American administration. Trump and his top MAGA officials condemn the EU’s Digital Services Act — which seeks to force big platforms like Elon Musk’s X, Facebook, Instagram to moderate content — as a form of “Orwellian” censorship against conservative and right-wingers. The presidential veto stops national regulators in Warsaw from implementing the DSA and sets Nawrocki up for a a clash with centrist pro-EU Prime Minister Donald Tusk. Tusk’s parliamentary majority passed the legislation introducing the DSA in Poland. Nawrocki argued that while the bill’s stated aim of protecting citizens — particularly minors — was legitimate, the Polish bill would grant excessive power to government officials over online content, resulting in “administrative censorship.”  “I want this to be stated clearly: a situation in which what is allowed on the internet is decided by an official subordinate to the government resembles the construction of the Ministry of Truth from George Orwell’s novel 1984,” Nawrocki said in a statement — echoing the U.S.’s stance on the law. Nawrocki also warned that allowing authorities to decide what constitutes truth or disinformation would erode freedom of expression “step by step.” He called for a revised draft that would protect children while ensuring that disputes over online speech are settled by independent courts. Deputy Prime Minister and Digital Affairs Minister Krzysztof Gawkowski dismissed Nawrocki’s position, accusing the president of undermining online safety and siding with digital platforms.  “The president has vetoed online safety,” Gawkowski told a press briefing Friday afternoon, arguing the law would have protected children from predators, families from disinformation and users from opaque algorithms.  The minister also rejected Nawrocki’s Orwellian comparisons, saying the bill explicitly relied on ordinary courts rather than officials to rule on online content. Gawkowski said Poland is now among the few EU countries without national legislation enabling effective enforcement of the DSA and pledged that the government would continue to pursue new rules. The clash comes as enforcement of the social media law has become a flashpoint in EU-U.S. relations.  Brussels has already fined Elon Musk’s X €120 million for breaching the law, prompting a furious response from Washington, including travel bans imposed by the Trump administration on former EU Commissioner Thierry Breton, an architect of the tech law, and four disinformation experts. The DSA allows fines of up to 6 percent of a company’s global revenue and, as a measure of last resort, temporary bans on platforms. Earlier this week, the European Commission expanded its investigation into X’s AI service Grok after it started posting a wave of non-consensual sexualized pictures of people in response to X users’ requests. The European Commission’s digital spokesperson Thomas Regnier said the EU executive would not comment on national legislative procedures. “Implementing the DSA into national law is essential to allow users in Poland to benefit from the same DSA rights, such as challenging platforms if their content is deleted or their account suspended,” he said. “This is why we have an ongoing infringement procedure against Poland. We have referred Poland to the Court of Justice of the EU for failure to designate and empower the Digital Services Coordinator,” in May 2025, Regnier added. Gawkowski said that the government would make a quick decision on what to do next with the vetoed bill but declined to offer specifics on what a new bill would look like were it to be submitted to parliament again. Tusk four-party coalition does not have enough votes in parliament to override Nawrocki’s vetoes. That has created a political deadlock over key legislation efforts by the government, which stands for reelection next year. Nawrocki, meanwhile, is aiming to help the Law and Justice (PiS) political party he’s aligned with to retake power after losing to Tusk in 2023. Mathieu Pollet contributed reporting.

BRUSSELS — Donald Trump blew up global efforts to cut emissions from shipping, and now the EU is terrified the U.S. president will do the same to any plans to tax carbon emissions from long-haul flights. The European Commission is studying whether to expand its existing carbon pricing scheme that forces airlines to pay for emissions from short- and medium-haul flights within Europe into a more ambitious effort covering all flights departing the bloc. If that happens, all international airlines flying out of Europe — including U.S. ones — would face higher costs, something that’s likely to stick in the craw of the Trump administration. “God only knows what the Trump administration will do” if Brussels expands its own Emissions Trading System to include transatlantic flights, a senior EU official told POLITICO. A big issue is how to ensure that the new system doesn’t end up charging only European airlines, which often complain about the higher regulatory burden they face compared with their non-EU rivals. The EU official said Commission experts are now “scratching their heads how you can, on the one hand, talk about extending the ETS worldwide … [but] also make sure that you have a bit of a level playing field,” meaning a system that doesn’t only penalize European carriers. Any new costs will hit airlines by 2027, following a Commission assessment that will be completed by July 1. Brussels has reason to be worried.  “Trump has made it very clear that he does not want any policies that harm business … So he does not want any environmental regulation,” said Marina Efthymiou, aviation management professor at Dublin City University. “We do have an administration with a bullying behavior threatening countries and even entities like the European Commission.” The new U.S. National Security Strategy, released last week, closely hews to Trump’s thinking and is scathing on climate efforts. “We reject the disastrous ‘climate change’ and ‘Net Zero’ ideologies that have so greatly harmed Europe, threaten the United States, and subsidize our adversaries,” it says. In October, the U.S. led efforts to prevent the International Maritime Organization from setting up a global tax to encourage commercial fleets to go green. The no-holds-barred push was personally led by Trump and even threatened negotiators with personal consequences if they went along with the measure. In October, the U.S. led efforts to prevent the International Maritime Organization from setting up a global tax aimed at encouraging commercial fleets to go green. | Nicolas Tucat/AFP via Getty Images This “will be a parameter to consider seriously from the European Commission” when it thinks about aviation, Efthymiou said. The airline industry hopes the prospect of a furious Trump will scare off the Commission. “The EU is not going to extend ETS to transatlantic flights because that will lead to a war,” said Willie Walsh, director general of the International Air Transport Association, the global airline lobby, at a November conference in Brussels. “And that is not a war that the EU will win.” EUROPEAN ETS VS. GLOBAL CORSIA In 2012, the EU began taxing aviation emissions through its cap-and-trade ETS, which covers all outgoing flights from the European Economic Area — meaning EU countries plus Iceland, Liechtenstein and Norway. Switzerland and the U.K. later introduced similar schemes. In parallel, the U.N.’s International Civil Aviation Organization was working on its own carbon reduction plan, the Carbon Offsetting and Reduction Scheme for International Aviation. Given that fact, Brussels delayed imposing the ETS on flights to non-European destinations. The EU will now be examining the ICAO’s CORSIA to see if it meets the mark. “CORSIA lets airlines pay pennies for pollution — about €2.50 per passenger on a Paris-New York flight,” said Marte van der Graaf, aviation policy officer at green NGO Transport & Environment. Applying the ETS on the same route would cost “€92.40 per passenger based on 2024 traffic.” There are two reasons for such a big difference: the fourfold higher price for ETS credits compared with CORSIA credits, and the fact that “under CORSIA, airlines don’t pay for total emissions, but only for the increase above a fixed 2019 baseline,” Van der Graaf explained. “Thus, for a Paris-New York flight that emits an average of 131 tons of CO2, only 14 percent of emissions are offset under CORSIA. This means that, instead of covering the full 131 tons, the airline only has to purchase credits for approximately 18 tons.” Efthymiou, the professor, warned the price difference is projected to increase due to the progressive withdrawal of free ETS allowances granted to aviation. The U.N. scheme will become mandatory for all U.N. member countries in 2027 but will not cover domestic flights, including those in large countries such as the U.S., Russia and China. KEY DECISIONS By July 1, the Commission must release a report assessing the geographical coverage and environmental integrity of CORSIA. Based on this evaluation, the EU executive will propose either extending the ETS to all departing flights from the EU starting in 2027 or maintaining it for intra-EU flights only. Opposition to the ETS in the U.S. dates back to the Barack Obama administration. | Pete Souza/White House via Getty Images According to T&E, CORSIA doesn’t meet the EU’s climate goals. “Extending the scope of the EU ETS to all departing flights from 2027 could raise an extra €147 billion by 2040,” said Van der Graaf, noting that this money could support the production of greener aviation fuels to replace fossil kerosene. But according to Efthymiou, the Commission might decide to continue the current exemption “considering the very fragile political environment we currently have with a lunatic being in power,” she said, referring to Trump. “CORSIA has received a lot of criticism for sure … but the importance of CORSIA is that for the first time ever we have an agreement,” she added. “Even though that agreement might not be very ambitious, ICAO is the only entity with power to put an international regulation [into effect].” Regardless of what is decided in Brussels, Washington is prepared to fight. Opposition to the ETS in the U.S. dates back to the Barack Obama administration, when then-Secretary of State Hillary Clinton sent a letter to the Commission opposing its application to American airlines. During the same term, the U.S. passed the EU ETS Prohibition Act, which gives Washington the power to prohibit American carriers from paying for European carbon pricing. John Thune, the Republican politician who proposed the bill, is now the majority leader of the U.S. Senate.

BRUSSELS — When cocoa farmer Leticia Yankey came to Brussels last October, she had a simple message for the EU: Think about the mess your simplification agenda is creating for companies and communities. It was just weeks after the European Commission said it might delay the EU’s anti-deforestation law, which requires companies to prove the goods they import into the region are not produced on deforested land, for the second time. But in Yankey’s Ghana, cocoa farmers were ready for the rules, known as the EU Deforestation Regulation or EUDR, to kick in. “How are we going to be taken serious the next time we move to our communities, our farmers, and even the [Licensed Buying Companies] to tell them that EUDR is … coming back?” Yankey asked.  Since then, the Commission has kept making changes to the plan. First by floating the delay, then backtracking but proposing tweaks to the law — only for EU governments and lawmakers to reinstate the postponement, pile on additional carve-outs and then leave open the door for further changes in the spring. All within three months. It’s not just smaller companies and remote communities that are rankled by the EU’s will-they-won’t-they approach to lawmaking. Bart Vandewaetere, a VP for government relations and ESG engagement at Nestlé, says that when he reports on European legislative developments to the company board, they “[look] a little bit at me like: ‘Okay, what’s next? Will you come next week with something else, or do we need to implement it this way, or we wait?’” Since the start of Ursula von der Leyen’s second term as European Commission President, the EU has been rolling back dozens of rules in a bid to make it easier for businesses to make money and create jobs.   Encouraged by EU leaders to hack back regulations quickly and without fuss, the Commission presented 10 simplification packages last year — on top of its plan to loosen the anti-deforestation law — to water down rules in the agricultural, environment, tech, defense and automotive sectors as well as on access to EU funding. COMPLICATION AGENDA Brussels says it is answering the wishes of business for less paperwork and fewer legislative constraints, which companies claim prevent them from competing with their U.S. and Chinese rivals. It also promises billions in savings as a result. “We will accelerate the work, as a matter of utmost priority, on all proposals with a simplification and competitiveness dimension,” the EU institutions wrote this month in a joint declaration of priorities for the year ahead. The ones who got ready to implement the laws already even go as far as to say the EU is losing one of its key appeals: being a regulatory powerhouse with policies that encourage companies to transition towards more sustainable business models. | Nicolas Economou/NurPhoto via Getty Images But for many businesses, the frequent introduction, pausing and rewriting of EU rules is, just making life more complicated. “What we constantly hear from clients is that regulatory uncertainty makes it difficult to plan ahead,” said Thomas Delille, a partner at global law firm Squire Patton Boggs, even though they generally support the simplification agenda. The ones who got ready to implement the laws already even go as far as to say the EU is losing one of its key appeals: being a regulatory powerhouse with policies that encourage companies to transition towards more sustainable business models. “The European Union unfortunately has lost some trust in the boardrooms by making simplifications that are maybe undermining predictability,” said Nestlé’s Vandewaetere. The risk is that the EU will shoot itself in the foot by making it harder for companies to invest in the region, which is essential for competitiveness.  “This approach rewards the laggards,” said Tsvetelina Kuzmanova, senior project manager as the Cambridge Institute for Sustainability Leadership, adding that it “lowers expectations at the very moment when companies need clarity and policy stability to invest.” INEVITABLE TURBULENCE Many of Europe’s decision-makers are convinced that undoing business rules is a necessary step in boosting economic growth.  The simplification measures “were needed and they are needed,” said Danish Environment Minister Magnus Heunicke, confirming that he believes the EU regulatory environment is clearer now for businesses than it was a year ago. Denmark, which held the rotating presidency of the Council of the EU for the last six months, had led much of the negotiations on the simplification packages, or “omnibuses” in Brussels parlance. Brussels is also receiving as many calls from businesses to speed up its deregulation drive as those urging caution. For example, European agriculture and food chain lobbies like Copa-Cogeca and FoodDrink Europe said in a joint appeal that the EU should “address the regulatory, administrative, legal, practical and reporting burdens that agri-food operators are facing.” These, they added, are major obstacles to investing in sustainability and productivity. Successive omnibus packages should, meanwhile, be “proposed whenever necessary.” But undoing laws requires as much work and time as drafting them. Over the past year, lawmakers and EU governments have been enthralled in deeply political negotiations over these packages. Entire teams of diplomats, elected officials, assistants, translators and legal experts have been mobilized to argue over technical detail that many were engaged in drafting just a couple of years earlier.   Of the 10 omnibus proposals, three have already been finalized. The EU has also paused the implementation of the rules it’s currently reviewing so that companies don’t have to comply while the process is ongoing. “If you look at this from an industry perspective, there will be some turbulence before there is simplification, it’s inevitable,” said Gerard McElwee, another partner at Squire Patton Boggs.  Ironically, the EU has also faced criticism for making cuts too quickly — particularly to rules on environmental protection — and without properly studying the effect they would have on Europe’s economy and communities. Yankey, the cocoa farmer, said she understands the Commission’s quandary. “They just want to listen to both sides,” she said. “Somebody is ready, somebody is not ready.” But her community will need more EU support to help understand and adapt to legislative tweaks that impact them. The constant changes do not “help us to build confidence in the rules or the game that we are playing,” she said.

Donald Trump started his second term by calling the European Union an “atrocity” on trade. He said it was created to “screw” Americans. As he imposed the highest tariffs in a century, he derided Europe as “pathetic.” And to round off the year, he slammed the continent as “weak” and “decaying.” In the midst of all this, Ursula von der Leyen, the EU’s top official, somehow summoned the composure to fly to Trump’s Scottish golf resort to smile and shake hands on a one-sided trade deal that will inflict untold pain on European exporters. She even managed a thumbs up in the family photo with Trump afterwards. Yes, it’s been one hell of a year for the world’s biggest trading relationship. The economic consequences will take years to materialize — but the short-term impact is manifest: in forcing Europe to face up to its overreliance on the U.S. security umbrella and find new friends to trade with. With a warning that the following might trigger flashbacks, we take you through POLITICO’s coverage of Europe’s traumatic trade year at the hands of Trump: JANUARY As Trump returns to the White House, we explore how America’s trading partners are wargaming his trade threats. The big idea? Escalate to de-escalate. It’s a playbook we later saw unfold in Trump’s clashes with China and Canada. But, in the event, the EU never dares to escalate. Trump’s return does galvanize the EU into advancing trade deals with other partners — like Mexico or Latin America’s Mercosur bloc. “Europe will keep seeking cooperation — not only with our long-time like-minded friends, but with any country we share interests with,” von der Leyen tells the World Economic Forum the day after Trump is sworn in. FEBRUARY As Trump announces that he will reimpose steel and aluminum tariffs, von der Leyen vows a “firm and proportionate response.” The bloc has strengthened its trade defenses since his first term, and needs to be ready to activate them, advises former top Commission trade official Jean-Luc Demarty: “Especially with a personality like Trump, if we don’t react, he’ll trample us.” That begs the question as to whether trade wars are as easy to win, as Trump likes to say. The short answer is, of course, “no.” Trade Commissioner Maroš Šefčovič, meanwhile, packs a suitcase full of concessions on his first mission to Washington. At the end of the month, Brussels threatens to use its trade “bazooka” — a trade-defense weapon called the Anti-Coercion Instrument — after Trump says the European Union was created to “screw” America. MARCH We called it early with this cover story by Nicholas Vinocur and Camille Gijs: Trump wants to destroy the EU — and rebuild it in his image. As Trump’s steel tariffs enter force, Brussels announces retaliatory measures that far exceed those it imposed in his first term. And, as he builds up to his “Liberation Day” tariff announcement, the EU signals retaliation extending beyond goods to services such as tech and banking. (None of these are implemented.) APRIL “They rip us off. It’s so sad to see. It’s so pathetic,” Trump taunts the EU as he throws it into the sin bin along with China, Japan, Taiwan and Korea. In his Liberation Day announcement in the White House Rose Garden, Trump whacks the EU with a 20 percent “reciprocal” tariff. Von der Leyen’s response the next morning is weak: She says only that the EU is “prepared to respond.” That’s because, even though the EU has strengthened its trade armory, its 27 member countries can’t agree to deploy it. The bloc nonetheless busies itself with drawing up a retaliation list of goods made in states run by Trump’s Republican allies — including trucks, cigarettes and ice cream. MAY The EU’s hit list gets longer in response to Trump’s Liberation Day tariffs — with planes and automobiles targeted in a €100 billion counterstrike that looks scary on paper but is never acted on.  We report exclusively that Brussels is ramping up contacts with a Pacific trade group called the CPTPP. And we assess the chances of Trump pressuring the EU into a big, beautiful trade deal by threatening to raise duties on European exports to 50 percent. The verdict? Dream on!  JUNE The setting shifts to the Canadian Rockies — where a G7 summit takes on a G6 vs. Trump dynamic as other leaders seek ways to cooperate with him on Russia and China even as he pummels them with tariffs. Von der Leyen tries her best, turning hawkish on China in a bid to find common ground. Back in Brussels, at a European leaders’ summit, von der Leyen announces her pivot to Asia — floating the idea of a world trade club without the U.S. JULY As the clock counts down to Trump’s July 9 deal deadline, the lack of unity among the EU’s 27 member countries undermines its credibility as a negotiating partner to be reckoned with. There’s still hope that the EU can lock in a 10 percent tariff, but should it take the deal or leave it? The deadline slips and, as talks drag on, it looks more likely that the EU will end up with a 15 percent baseline tariff — far higher than Europe had feared at the start of Trump’s term. Brussels is still talking about retaliation but … yeah … you already know that won’t happen. With Trump in Scotland for a golfing weekend, von der Leyen jets in to shake hands on a historic, but one-sided trade deal at his Turnberry resort. Koen Verhelst also flies in to get the big story. “It was heavy lifting we had to do,” von der Leyen said, stressing that the 15 percent tariff would be a ceiling. AUGUST Despite the thumbs-up in Turnberry, recriminations soon fly that the EU has accepted a bad deal. EU leaders defend it as the best they could get, given Europe’s reliance on the U.S. to guarantee its security. The two sides come out with a joint statement spelling out the terms — POLITICO breaks it down. Not only does the EU come off worse in the Turnberry deal, but it also sacrifices its long-term commitment to rules-based trade in return for Trump’s uncertain support for Ukraine. The realization slowly dawns that Europe’s humiliation could be profound and long-lasting. With the ink barely dry on the accord, Trump takes aim at digital taxes and regulation that he views as discriminatory. It’s a blast that is clearly aimed at Brussels. SEPTEMBER The torrent of trade news slows — allowing Antonia Zimmermann to travel to Ireland’s “Viagra Village” to report how Trump’s drive to reshore drug production threatens Europe’s top pharmaceuticals exporter. OCTOBER EU leaders resist Trump’s pressure to tear up the bloc’s business rules, instead trying to present a red tape-cutting drive pushed by von der Leyen as a self-generated reform that has the fringe benefit of addressing U.S. concerns.    NOVEMBER Attention shifts to Washington as the U.S. Supreme Court hears challenges to Trump’s sweeping tariffs. The justices are skeptical of his invocation of emergency powers to justify them. Even Trump appointees on the bench subject his lawyer to tough questioning.  A row flares on the first visit to Brussels by U.S. Commerce Secretary Howard Lutnick and Trade Representative Jamieson Greer. Lutnick presses for concessions on EU digital regulation in exchange for possible tariff relief on steel. “Blackmail,” is the counterblast from Teresa Ribera, the EU’s top competition regulator. DECEMBER The year ends as it started, with another Trump broadside against Europe and its leaders. “I think they’re weak,” he tells POLITICO. “They don’t know what to do on trade, either.”

LONDON — Standing in Imperial College London’s South Kensington Campus in September, Britain’s trade chief Peter Kyle insisted that a tech pact the U.K. had just signed with the U.S. wouldn’t hamper his country’s ability to make its own laws on artificial intelligence.   He had just spoken at an intimate event to celebrate what was meant to be a new frontier for the “special relationship” — a U.K.-U.S. Technology Prosperity Deal.  Industry representatives were skeptical, warning at the time the U.S. deal would make the path to a British AI bill, which ministers had been promising for months, more difficult.   This month U.K. Tech Secretary Liz Kendall confirmed ministers are no longer looking at a “big, all-encompassing bill” on AI.   But Britain’s shift away from warning the world about runaway AI to ditching its own attempts to legislate frontier models, such as ChatGPT and Google’s Gemini, go back much further than that September morning.   GEAR CHANGE In opposition Prime Minister Keir Starmer promised  “stronger” AI regulation. His center-left Labour Party committed to “binding regulation” on frontier AI companies in its manifesto for government in 2024, and soon after it won a landslide election that summer it set out plans for AI legislation.   But by the fall of 2024 the view inside the U.K. government was changing. Kyle, then tech secretary, had asked tech investor Matt Clifford to write an “AI Opportunities Action Plan” which Starmer endorsed. It warned against copying “more regulated jurisdictions” and argued the U.K. should keep its current approach of letting individual regulators monitor AI in their sectors.  In October 2024 Starmer described AI as the “opportunity of this generation.” AI shifted from a threat to be legislated to an answer to Britain’s woes of low productivity, crumbling public services and sluggish economic growth. Labour had came to power that July promising to fix all three.   A dinner that month with Demis Hassabis, chief executive and co-founder of Google DeepMind, reportedly opened Starmer’s eyes to the opportunities of AI. Hassabis was coy on the meeting when asked by POLITICO, but Starmer got Hassabis back the following month to speak to his cabinet — a weekly meeting of senior ministers — about how AI could transform public services. That has been the government’s hope ever since. In an interview with The Economist this month Starmer spoke about AI as a binary choice between regulation and innovation. “I think with AI you either lean in and see it as a great opportunity, or you lean out and think, ‘Well, how do we guard ourselves against the risk?’ I lean in,” he said.  ENTER TRUMP The evolution of Starmer’s own views in the fall of 2024 coincided with the second coming of Donald Trump to the White House. In a letter to the U.S. attorney general the month Trump was elected influential Republican senator Ted Cruz accused the U.K.’s AI Security Institute of hobbling America’s efforts to beat China in the race to powerful AI. The White House’s new occupants saw AI as a generational competition between America and China. Any attempt by foreign regulators to hamper its development was seen as a threat to U.S. national security. It appeared Labour’s original plan, to force largely U.S. tech companies to open their models to government testing pre-release, would not go down well with Britain’s biggest ally. Instead, U.K. officials adapted to the new world order. In Paris in February 2025, at an international AI Summit series which the U.K. had set up in 2023 to keep existential AI risks at bay, the country joined the U.S. in refusing to sign an international AI declaration.  The White House went on to attack international AI governance efforts, with its director of tech policy Michael Kratsios telling the U.N. that the U.S. wanted its AI technology to become the “global gold standard” with allies building their own AI tech on top of it.  In opposition Prime Minister Keir Starmer promised  “stronger” AI regulation. | Jonathan Brady/PA Images via Getty Images The U.K. was the first country to sign up, agreeing the Technology Prosperity Deal with the U.S. that September. At the signing ceremony, Trump couldn’t have been clearer. “We’re going to have a lot of deregulation and a tremendous amount of innovation,” he told a group of hand-picked business leaders.   The deal, which was light on detail, was put on ice in early December as the U.S. used it to try to extract more trade concessions from the Brits. Kratsios, one of the architects of that tech pact, said work on it would resume once the U.K. had made “substantial” progress in other areas of trade.   DIFFICULT HOME LIFE While Starmer’s overtures to the U.S. have made plans for an AI bill more difficult, U.K. lawmakers have further complicated any attempt to introduce legislation. A group of powerful “tech peers” in the House of Lords have vowed to hijack any tech-related bill and use it to force the government to make concessions in other areas they have concerns about like AI and copyright, just as they did this summer over the Data Use and Access Bill. Senior civil servants have also warned ministers a standalone AI bill could become messy “Christmas Tree” bill, adorned with unrelated amendments, according to two officials granted anonymity to speak freely.   The government’s intention is to instead break any AI-related legislation up into smaller chunks. Nudification apps, for example, will be banned as part of the government’s new Violence Against Women and Girls Strategy, AI chatbots are being looked at through a review of the Online Safety Act, while there will also need to be legislation for AI Growth Labs — testbeds where companies can experiment with their products before going to market.   Asked about an AI bill by MPs on Dec. 3, Kendall said: “There are measures we will need to take to make sure we get the most on growth and deal with regulatory issues. If there are measures we need to do to protect kids online, we will take those. I am thinking about it more in terms of specific areas where we may need to act rather than a big all-encompassing bill.” The team in Kendall’s department which looks at frontier AI regulation, meanwhile, has been reassigned, according to two people familiar with the team. Polling by the Ada Lovelace Institute shows Labour’s leadership is out of sync with public views on AI, with 9 in 10 wanting an independent AI regulator with enforcement powers.   “The public wants independent regulation,” said Ada Lovelace Director Gaia Marcus. “They prioritize fairness, positive social impacts and safety in trade-offs against economic gains, speed of innovation and international competition.”  A separate study by Focal Data found that framing AI as a geopolitical competition also doesn’t resonate with voters. “They don’t want to work more closely with the United States on shared digital and tech goals because of their distrust of its government,” the research found.  Political leadership must step in to bridge that gap, former U.K. prime minister Tony Blair wrote in a report last month. “Technological competitiveness is not a priority for voters because European leaders have failed to connect it to what citizens care about: their security, their prosperity and their children’s futures,” he wrote.   For Starmer, who has struggled to connect with the voters, that will be a huge challenge.

WHO’S AFRAID OF AI?  The EU wants to regulate, while the U.S. government is letting companies run free. What’s behind the divergent approaches goes back a century. By CALDER MCHUGH Illustrations by Nicolás Ortega for POLITICO A young American student gets a text from an AI agent: “stanford just sent an email asking where you wanna study abroad.” After asking “uhhh where should i go” back to the app and deciding on Paris, he spends the semester at first confused by the European capital and then in love, as he meets a French girl and goes to picnics and movies, all with the help of his trusty AI friend. As the semester draws to a close, he asks for help: “can you check me into my flight home?” The AI agent replies: “wait no. why would you wanna go back man” to which the young man responds, “??” The AI says, “stay in Paris.” And it’s decided: He looks up from his phone and puts his arm around his French girlfriend.   The back and forth is cut into a 2 minute, 37 second ad for Poke.com, an AI application that serves as something between a personal assistant and a wise friend, built by the startup Interaction. But ironically, even as it sells the dream of Americans heading to Europe, the company itself was formed when the opposite happened: Interaction is run out of California by German transplants.   The European-led American company is an example of a problem that has perplexed policymakers and tech advocates in Europe: Even though the continent can generate the ideas and talent needed to build new AI apps, it rarely becomes the place where those ideas scale. “Wherever you are in the world — Europe or Asia or wherever — everyone just wants to come to the Bay Area, as long as you’re in AI,” says Marvin von Hagen, one of the co-founders of Interaction. The data bear out von Hagen’s assertion. According to a report from the venture firm Accel,  80 percent of the money invested in generative AI in the U.S., Europe and Israel in 2023 and 2024 went to American firms. In 2024, the U.S. produced 40 “notable AI models,” compared to 15 in China and just three in Europe, according to the 2025 Artificial Intelligence Index Report from Stanford University. Eleven percent of all U.S. tech companies have European founders, and hundreds of promising companies begun in Europe — many concerned directly with AI — have moved to the United States.   “People that want to be part of this AI revolution come here [to the U.S.],” said Florian Juengermann, another German ex-pat who is the co-founder of Listen Labs, an AI company for customer research. “I’m a little bit sad, actually, for Germany.”   Tech founders working on AI companies head to the United States for all kinds of reasons, some of which are self-reinforcing: Silicon Valley is full of AI companies, which makes it easier to build an AI company there. There are more venture funds in the U.S., and they are more interested in investing in unknown products. But there’s another big reason, according to many of the founders themselves and AI advocates in Europe: Tech types are often deeply suspicious of regulation — and Europe certainly has plenty of it, particularly when it comes to AI.  In recent months, tech companies headquartered in Europe, as well as some national governments and the European Commission itself, have sought to lessen the regulatory burden on AI companies by delaying key parts of the implementation of legislation or advocating for the EU to reassess its entire framework. But the differences between Europe and the United States when it comes to AI regulation aren’t so easy to fix; they’re rooted in deep cultural differences that have informed how the tech industries have developed on both continents.   Scholars and members of the industry alike say that changing this culture is crucial for Europe to start playing catch-up, both when it comes to keeping more AI professionals on the continent and encouraging those who do stay to be more entrepreneurial.  “Today, European countries like Germany still retain exceptional talent,” said Robert Windesheim, a German investor at the San Francisco-based Founders Fund, “but often lack the cultural atmosphere that enables this talent to channel their energy into creating new companies.”  PRECEDENT The European Union has for decades been more committed to regulation across industries than the United States. And for as long as Europe has chosen a somewhat slower, somewhat safer growth model, there have been young, ambitious people who get frustrated by bureaucratic guardrails.    But exactly why the EU has such a different understanding of the role of the state — in particular as it relates to AI — is a broader question that goes to the heart of the historical and cultural differences across the Atlantic.   A lot of it has to do with privacy. “The first thing that many people in Europe think about when they think about technology is ‘They will spy on us,’ or ‘This technology will be used in a negative way,’” said Juengermann. “For example, in Germany, people will not give out their phone number. They protect their phone number. It’s like people [in the U.S.] with their Social Security number.”   According to Anu Bradford, a professor at Columbia University who studies the European Union’s digital regulatory state — who herself is largely in favor of Europe’s regulations on AI — some of this can be traced almost a century back. “You need to think about historical reasons and the Second World War, and how the Nazis got the information to identify the Jews — they were infringing on their right to privacy,” she said. “You think about the surveillance by the Stasi in East Germany. Europeans know what it’s like when you don’t have privacy … they’re hypersensitive to that for cultural reasons.”  Dean Ball, who was the primary author of the Trump administration’s AI Action Plan, has little agreement with Bradford about regulation. But he also traced the cultural differences between the two places to the mid-20th century. The European Union has “preserved the status quo in amber,” Ball believes, operating with a 20th century mindset to solve 21st century problems.    Windesheim, a European by birth himself, also traced fears of safety to crises from the last century. “Europe’s 20th-century catastrophes left a lasting, and rightfully cautionary, mindset. Downside protection and safety became paramount,” he said. In large part, he believes, Europeans have simply adopted and codified into law a different risk assessment around tech than the American government.   Then there’s Silicon Valley, which itself has a culture that’s out of step with much of the American and European populace — and that has shaped the rest of America’s posture on tech. That culture has long been guided by a libertarian ethos and unwavering faith in technological advancement, not the forces that might inhibit it. “Despite the central role played by public intervention in developing hypermedia, the Californian ideologues preach an anti-statist gospel of hi-tech libertarianism: a bizarre mishmash of hippie anarchism and economic liberalism beefed up with lots of technological determinism,” two media theorists wrote in a seminal essay, The Californian Ideology, for Whole Earth Catalog in the mid-90s.  One of the most popular concepts flowing through Bay Area circles today is the idea of accelerationism. This philosophy includes different strains of thought: all the way from believing (and hoping) that unregulated AI development will lead to a techno-utopia where the machines solve disease to believing (and hoping) that AI will destroy democracy and usher in a world where a vanishingly small number of tech overlords rule the world. These different outlooks contributed to vastly different regulatory cultures around technology in the U.S. and EU through the 20th and 21st centuries. The EU’s General Data Protection Regulation, a comprehensive privacy law implemented in 2018, enshrines a right to privacy that doesn’t exist in the U.S. — and restricts tech companies’ ability to collect data and monetize it, which has had massive ramifications for tech companies’ ability to grow in Europe.   “There’s a lot of hubris, a lot of arrogance, and [Europe] really has this mindset that they need to be the world’s regulator, but they do it before the technology is actually developed,” said Michael Jackson, an American tech investor who lives and works in Paris. That’s compared to the U.S., where according to him, the government steps in with more targeted regulation once it understands the needs of the marketplace.  AI threw these differences into starker relief than ever. AI presented greater challenges to privacy and more opportunities for surveillance, and the consequences are harder to predict than almost any other innovation that had come before it, with the possible exception of the internet itself — a nightmare for the risk-averse.   Europe has taken a notably more muscular regulatory approach. The Artificial Intelligence Act — which entered into force in the EU on August 1st, 2024, is Europe’s most comprehensive attempt at reining in AI companies that are not acting in the best interest of the public. Largely, the legislation is about harm reduction. It creates categories of risk for AI applications — from “minimal” to “unacceptable” risk (the latter applications are banned) — and forces most AI companies to be more transparent about how they work.  At the same time, after some halting efforts to regulate AI during the Joe Biden administration, the U.S. under President Donald Trump has thrown regulation to the side. In July, the Trump administration released the AI Action Plan, a series of policy preferences that pledged to “remove red tape and onerous regulation” of AI development. As the EU regulates more, America is doing so less. And as the gap has widened, so has the number of founders in each place.  There have also been new reasons why Europe needs to think about regulation. “[American success] has amplified the need for Europe to protect itself, because you find yourself increasingly more dependent on a technology you don’t own and you don’t control,” said Mariarosaria Taddeo, an Italian who is now a professor of digital ethics and defense technologies at the Oxford Internet Institute in the UK.   The EU has to think more about stimulating tech development, she said, because it is not sure what the ultimate goals of American tech giants are — and how much it might need to fight against a private corporation that doesn’t have the best interests of Europe’s citizens in mind.   “[Europe] is in a weak position, because most of the developers [in the world] are Americans,” said Bradford. “It’s becoming increasingly hard, if the EU is trying to police the world on its own and if the Americans are not regulating themselves.”  BEYOND THE NARRATIVE Advocates for the European framework argue that far from stifling innovation, it simply makes this rapidly emerging technology safer for users and founders alike. In fact, they chafe at the very notion that regulation and innovation are antithetical.   “I don’t want there to be this perception that you need to choose the American hands-off model if you want to have innovation, and the European model will be somehow fundamentally inconsistent with innovation,” said Bradford. “It’s a very easy narrative to say, ‘Well, because they regulate so much, there’s no innovation.’ That’s not why Europeans are not leading in AI innovation.”  Bradford cited the difficulty of having 27 jurisdictions without a single, united marketplace, as one of the major reasons that AI development in the EU has not been simple — an idea that many anti-regulation experts and tech founders also agreed with.   Beyond that, there’s just more investment available in America right now. Venture capitalists are pouring money into U.S.-based tech companies and are often more reticent to do so for those that are elsewhere — between 2013 and 2022, EU-headquartered firms received $1.4 trillion less in venture funding than those based in the U.S.   Europe is also far from the only place where the regulatory state is on the rise.   In fact, although Washington may not be moving to put guardrails on AI, the state of California is stepping into the breach and implementing several AI guidelines that do a similar job. One reason is that Americans are also fearful of unregulated AI — according to a Gallup poll conducted in April and May of 2025, 80 percent of Americans believe in maintaining rules for AI safety and data security, even if it means developing AI capabilities at a slower rate.   “My view is that Americans and Europeans are closely aligned on AI governance. If you look at the polling data, if you look at the concerns about copyright, concerns about privacy, concerns about labor displacement, you see it in equal measure in both regions,” said Marc Rotenberg, the president and founder of the Center for AI and Digital Policy in Washington. “The White House has taken a position on AI regulation that’s out of step with where most Americans are, with where most state legislators are, and even with where they were previously.”  For Euro-optimists, there are some signs that while the governance might not be perfect, regulation is not stifling innovation, and Europe is starting to find its footing in the realm of AI development.  “AI is not going to disappear. It’s not going to be gone in 10 years … You don’t need to be first in AI. You need to be resilient and robust and trustworthy in AI,” said Taddeo.  Even as Europe takes a more robust regulatory posture, they are also trying to get in on the action. In November, the European Commission mobilized €200 billion for AI investment and French President Emmanuel Macron announced a commitment to sinking €109 billion in private investment into the sector. In the Nordic countries in particular, government investment has led to innovation and successful, growing companies. So far, though, no European government has taken direct aim at the regulatory state.   But as the continent tries its own approach to building companies that’s wildly different from Silicon Valley’s, the question is whether they’re too late to matter — whether the good parts of the party are already over.   “They were too late five years ago, and they’re absolutely too late now,” said Ball. 

Pedro Sánchez is the prime minister of Spain. It’s no secret the world is going through a time of turbulence. The principles that held it together for decades are under threat; disinformation is spreading freely; and even the foundations of the welfare state — which brought us the longest period of prosperity in human history — are now being questioned by a far-right transnational movement challenging our democratic systems’ ability to deliver collective solutions and social justice. In the face of this attack, Europe stands as a wall of resistance. The EU has been  — and must remain — a shelter for the values that uphold our democracies, our cohesion and our freedom. But let’s be honest, values don’t put a roof over your head. And at any rate, these values are fading fast in the face of something as concrete and urgent as the lack of affordable housing. If we do not act, Europe risks becoming a shelter without homes. The figures are clear: The housing crisis is devastating the standard of living across Europe. Between 2010 and 2025, home prices rose by 60 percent, while rental prices went up by nearly 30 percent. In countries like Estonia or Hungary, prices have tripled. In densely populated or high-tourism cities, families can spend over 70 percent of their income on rent. And individuals with stable jobs in Madrid, Lisbon or Budapest can no longer afford to live where they work or where they grew up. Meanwhile, 93 million Europeans — that’s one in five — are living at risk of poverty or social exclusion. This isn’t just the perception of experts or institutions: Around half of Europeans consider housing to be an “urgent and immediate problem.” Housing, which should be a right, has become a trap that shapes peoples’ present, suffocates their future and endangers Europe’s cohesion, economic dynamism and prosperity. The roots of this problem may differ from country to country, but two facts are undeniable and shared throughout our continent: First, the need for more houses, which we’ve been falling behind on for years. For nearly two decades now, residential construction in the EU has fallen short of demand. After a period of strong growth in the 1990s and early 2000s, the 2008 financial crisis triggered a collapse in housing investment, and the sector never fully recovered. The pandemic only widened this gap, halting permits, delaying materials and worsening labor shortages that further stalled construction. Second, and just as urgent, is that we must ensure both new construction and existing housing stock serve their true purpose: upholding the fundamental right to decent and affordable housing. Because as we continue to fall short of guaranteeing this basic right, homes are increasingly being diverted to fuel speculation or serve secondary uses like tourist rentals. In fact, according to preliminary European Parliament data, there were around 4 million short-term rental listings on digital platforms across the EU in 2025. In my home country, cities like Madrid and València have witnessed the displacement of residents from their historic centers, which are transforming into theme parks for tourists. For nearly two decades now, residential construction in the EU has fallen short of demand. | David Zorrakino/Getty Images At the same time, housing is increasingly being treated as a financial asset instead of a social good. In Ireland, investment funds have acquired nearly half of all newly built homes since 2017, while in Sweden, institutional investors now control 24 percent of all private rental apartments. Just as no one would dare justify doubling the price of a bowl of rice for a starving child, we cannot accept turning the roofs meant to shelter people into a vehicle for speculation — and citizens overwhelmingly share in this view. Seventy-one percent of Europeans believe that the places they live would benefit from more controls on property speculation, like taxing vacant rentals or regulating short-term rentals. This is what the EU stands for: When it’s a choice between profit and people, we choose people. That choice can’t wait any longer. Thankfully, with yesterday’s Affordable Housing Plan, the European Commission is starting to move on housing, taking steps that Spain has long advocated. Brussels now increasingly recognizes the scale of this emergency and acknowledges that specific market conditions may require differentiated national and local responses. This will help consolidate a shared policy understanding regarding housing-stressed areas and strengthen the case for targeted measures — which may include, among others, restrictions on short-term rentals. Crucially, the plan also stresses the need for EU financing to boost housing supply. The time for words is over. We need urgent action. A growing outcry over housing is resonating across Europe, and our citizens need concrete solutions. Any failure to act with ambition and urgency risks turning the housing crisis into a new driver of Euroskepticism. After World War II, Europe was built on two founding promises: securing peace and delivering well-being. Honoring that legacy today means taking decisive action by massively increasing flexible funding to match the scale of the housing crisis, and guaranteeing member countries can swiftly implement the legal tools needed to adopt bold regulatory measures on short-term rentals and address the impact of nonresident buyers on housing access. The true measure of our union isn’t just written in treaties. It must be demonstrated by ensuring every person can live with dignity and have a place to call home. Let us rise to that promise — boldly, together and without delay.

BRUSSELS — The European Commission has done everything in its power to accommodate the concerns of member countries over the EU’s trade deal with the Latin American Mercosur bloc and get it over the finish line, Trade Commissioner Maroš Šefčovič told POLITICO. “I hope we will pass the test this week because we really went to unprecedented lengths to address the concerns which have been presented to us,” Šefčovič said in an interview on Monday.  “Now it’s a matter of credibility, and it’s a matter of being strategic,” he stressed, explaining that the huge trade deal is vital for the European Union at a time of increasingly assertive behavior by China and the United States. “Mercosur very much reflects our ambition to play a strategic role in trade, to confirm that we are the biggest trader on this planet.” The commissioner’s remarks come as time is running short to hold a vote among member countries that would allow Commission President Ursula von der Leyen to fly to Brazil on Dec. 20 for a signing ceremony with the Mercosur countries — Brazil, Argentina, Uruguay and Paraguay. “The last miles are always the most difficult,” Šefčovič added. “But I really hope that we can do it this week because I understand the anxiety on the side of our Latin American partners.”  The vote in the Council of the EU, the bloc’s intergovernmental branch, has still to be scheduled. To pass, it would need to win the support of a qualified majority of 15 member countries representing 65 percent of the bloc’s population. It’s not clear whether France — the EU country most strongly opposed to the deal — can muster a blocking minority. If Paris loses, it would be the first time the EU has concluded a big trade deal against the wishes of a major founding member. France, on Sunday evening, called for the vote to be postponed, widening a rift within the bloc over the controversial pact that has been under negotiation for more than 25 years. Several pro-deal countries warn that the holdup risks killing the trade deal, concerned that further stalling it could embolden opposition in the European Parliament or complicate next steps when Paraguay, which is skeptical toward the agreement, takes over the presidency of the Mercosur bloc from current holder Brazil. Asked whether Brussels had a Plan B if the vote does not take place on time, Šefčovič declined to speculate. He instead put the focus on a separate vote on Tuesday in the European Parliament on additional farm market safeguards proposed by the Commission to address French concerns. “There are still expectations on how much we can advance with some of the measures which are not yet approved, particularly in the European Parliament,” he stressed.  “If you look at the safeguard regulation, we never did anything like this before. It’s the first [time] ever. It’s, I would say, very, very far reaching.”